Internet Video Explodes
Not only did consumption of Internet video explode last year, about $630 million worth of revenue was generated as well, up from $302 million in 2005, according to researchers at The Yankee Group. Download and advertising account for most of the revenue, but subscription and download revenue also contributed to a lesser extent.
By 2011, Internet video will generate $4.74 billion in revenue, Yankee Group researchers now predict.
Internet users in the United States watched an average of 39.4 streams per month in 2005, accounting for more than 44 billion video streams delivered, says comScore. By 2006 monthly viewing climbed to 67.4, representing more than 86 billion video streams.
The majority of these streams were short user-generated clips, which caused the average stream length to shorten from 2.2 minutes in 2005 to 1.5 minutes in 2006.
About five to 10 percent of these streams were supported by advertising or purchased. That’s one reason why YouTube served up about 100 million video streams while generating only $15 million in revenue in 2006, according to Bear Stearns analysts.
But content is changing. As networks began to support Internet content distribution, more long-form programming is being consumed. As a result, the average number of streams viewed in the United States in the first half of 2007 declined to 58.9 streams per month, per viewer, while the average stream length increased to 2 minutes, 36 seconds.
That trend should continue, Yankee Group believes. By 2011, Internet users in the United States will watch on average 9.5 billion streams per month, with each stream averaging 8 minutes, 6 seconds. By that point, the number of broadband users in the United States will reach 221.3 by 2011, accounting for 71 percent of the U.S. population.
In 2005, on average, 94 million Internet users viewed internet-delivered video monthly in the United States. In 2006, this grew to 107 million. By 2011, this will reach 169 million, say Yankee Group researchers.
In 2005, video downloads, including download-to-own, rental and subscription, accounted for $40 million in revenue. By 2006 video download revenue grew to $180 million.
Video download revenue will grow to $270 million in 2007 and by 2011, video downloads will reach $850 million, Yankee Group researchers
believe.
The download-to-own category is lead by iTunes, whose customers downloaded 42 million TV shows and 1.3 million movies in 2006, generating about $105 million in the U.S. market.
That will grow to $159 million in 2007 and will reach $543 million by 2011, the Yankee Group believes.
Over the next half year to a year, TV show downloads are likely to drive most of the download-to-own revenue. But most of the money is kept by the content owners, who generally get 65 percent to 70 percent of the gross revenue.
Growth for the rental market, though, has been slow. Internet-based video rentals only accounted for $16 million in revenue in the United States market in 2005. Internet-based video rentals grew to $61.2 million in 2006 and will reach $270 million by 2011, with possibly 62 percent of rental revenue generated by game consoles.
Digital subscriptions are among the toughest product categories, for the most part because content is contractually restricted to three companies: Starz Encore, HBO and Showtime.
These three companies control the electronic subscription rights to feature films from the major studios for the next three to eight years. New providers consequently are going to find it difficult to impossible to develop competing download services.
Netflix, for example, found the restrictions a showstopper when it tried to start a subscription download service.
In 2006, subscription downloads accounted for about $12 million in revenue in the United States. By 2011, this will grow to $40 million. Meaningful growth beyond that cannot happen in this category until the middle of the next decade, when the current Starz Encore, HBO and Showtime contracts expire. IP
